Bounds for VIX futures given S&P 500 smiles

We derive sharp bounds for the prices of VIX futures using the full information of S&P 500 smiles. To that end, we formulate the model-free sub/superreplication of the VIX by trading in the S&P 500 and its vanilla options as well as the forward-starting log-contracts. A dual problem of minimizing/maximizing certain risk-neutral expectations is introduced and shown to yield the same value.The classical bounds for VIX futures given the smiles only use a calendar spread of log-contracts on the S&P 500. We analyze for which smiles the classical bounds are sharp and how they can be improved when they are not. In particular, we introduce a family of functionally generated portfolios which often improves the classical bounds while still being tractable; more precisely, they are determined by a single concave/convex function on the line. Numerical experiments on market data and SABR smiles show that the classical lower bound can be improved dramatically, whereas the upper bound is often close to optimal.     

How well does a small structural model with sticky prices and wages fit postwar U.S. data?

In this paper, we ask whether a small structural model with sticky prices and wages, embedding various modelling devices designed to increase the degree of strategic complementarity between price-setters, can fit postwar U.S. data. To answer this question, we resort to a two-step empirical evaluation of our model. In a first step, we estimate the model by minimizing the distance between theoretical autocovariances of key macroeconomic variables and their VAR-based empirical counterparts. In a second step, we resort to Watson's [Watson, M.W., 1993. Measures of fit for calibrated models. Journal of Political Economy 101, 1011–1041.] procedure [Measures of fit for calibrated models. Journal of Political Economy 101 (6), 1011.1041] to quantify the model's goodness-of-fit. Our main result is that the combination of sticky prices and sticky wages is central in order to obtain a good empirical fit. Our analysis also reveals that a model with only sticky wages does not perform well according to Watson's criterion [Watson, M.W., 1993. Measures of fit for calibrated models. Journal of Political Economy 101, 1011–1041.].     

ON UTILITY-BASED PRICING OF CONTINGENT CLAIMS IN INCOMPLETE MARKETS

We study the uniqueness of the marginal utility-based price of contingent claims in a semimartingale model of an incomplete financial market. In particular, we obtain that a necessary and sufficient condition for all bounded contingent claims to admit a unique marginal utility-based price is that the solution to the dual problem defines an equivalent local martingale measure.     

Introducing the Bank of Canada staff economic projections database

We present a new, publicly available database of real-time data and forecasts from the Bank of Canada's staff economic projections, which will be updated on an annual basis. We describe the data construct, its variables, coverage, and frequency. We then provide a forecast evaluation for gross domestic product (GDP) growth, consumer price index (CPI) inflation and the policy rate since 1982: We compare the staff's forecasts with those from commonly used time series models estimated with the real-time data, and with forecasts from other professional forecasters, and provide standard bias tests. Finally, we study changes in predictability of the Canadian economy following the announcement of the inflation-targeting regime in 1991. Our data set is unprecedented outside the USA, and our evidence is particularly interesting, as it covers over 30 years of staff forecasts, two severe recessions, and different monetary policy regimes.     

Information technologies and entrepreneurship

This article shows how the increase of information availability due to new technologies positively affects aggregate entrepreneurship in national economies. We rely on an “occupational choice” model of managerial production, extended to include the managerial use of information, to explain variations in the number of entrepreneurs, and thus of firms, as measured by the aggregate new business creation data. We present evidence that supports such a theory of industrial organization dynamics for a sample of 78 economies over the period 2004–2012 using panel data instrumental variable regressions.     

Network dynamics with a nested node set: Sociability in seven villages in Senegal

We propose two complementary ways to deal with a nesting structure in the node set of a network—such a structure may be called a multilevel network, with a node set consisting of several groups. First, within-group ties are distinguished from between-group ties by considering them as two distinct but interrelated networks. Second, effects of nodal variables are differentiated according to the levels of the nesting structure, to prevent ecological fallacies. This is elaborated in a study of two repeated observations of a sociability network in seven villages in Senegal, analyzed using the Stochastic Actor-oriented Model.     

The supply of non‐renewable resources

There exists no formal treatment of non‐renewable resource (NRR) supply, systematically deriving quantity as function of price. We establish instantaneous restricted (fixed reserves) and unrestricted NRR supply functions. The supply of a NRR at any date and location depends not only on the local contemporary price of the resource but also on prices at all other dates and locations. Besides the usual law of supply, which characterizes the own‐price effect, cross‐price effects have their own law. They can be decomposed into a substitution effect and a stock compensation effect. We show that the substitution effect always dominates: a price increase at some point in space and time causes NRR supply to decrease at all other points. Our new—although orthodox—setting takes into account not only NRR supply limitations but also the heterogeneity of NRR deposits, and the endogeneity of their development and opening. Our analysis extends to NRRs the partial‐equilibrium analysis of demand and supply policies. Thereby, it provides a generalization of results about policy‐induced changes on NRR markets.     

Perspectives on the Formal Authority Between Project Managers and Change Managers

Project management and change management both contribute to the management and delivery of changes to organizations; however, they are based on distinct bodies of knowledge, and practitioners of these disciplines have disparate views on how change should be managed. There is a lack of consensus about how these disciplines should work together to deliver organizational change projects, which may result in conflict. This research delves into practitioners’ perspectives on formal authority, the reporting relationship between these disciplines, and also reveals the fundamental differences in how practitioners of these disciplines view the practice of organizational change.